August 9, 2008

It all comes down to this......

I'm really trying to get my hands around this rather simple question. Question Simple. Answer, not so simple.

So in an attempt to see through the noise, I developed a simple 'inverse calculation' to figure this out. View, and comment if you want, on my spreadsheet.

It appears to come down to three variables:1) The long term underlying price of Coal2) The fully amortized cost of converting biomass (woodchips) to Bio Coal through the nitrification process3) The premium you think utilities or other buyers would pay for "green" fuel (which in a pure sense would be approximated by the value of any carbon credits, assuming the Bio Coal would qualify

The result yields a "cost per ton of biomass" that you would be willing to pay.

My numbers say that that the value is somewhere around $ 10 per ton on biomass.